Facebook is thriving thanks to pandemic, but sees four thunderclouds in...

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CEO Mark Zuckerberg (EPA-EFE / ERIK S. LESSER)

Facebook generated more than a fifth more revenue from advertising in the third quarter, despite the boycott that many large companies announced against the social media company this summer. The tech group, which also owns Instagram and WhatsApp, is more pessimistic about the near future.

The Facebook empire continues its impressive rise and now has 1.82 billion daily active users. The number of monthly active users reaches 2.74 billion.

  • The growth in terms of users is mainly in Asia, while Europe is stagnating.
  • In North America there was a slight decline in the third quarter. Facebook expects a further slight decline in the coming months.

Profit margin = 37 percent

The financial figures also point to further growth:

  • Third quarter sales were $ 21.5 billion, up 22 percent from a year earlier.
  • That increase was entirely due to increased revenues from advertisers using Facebook platforms. Almost all of Facebook’s revenue comes from advertising, other sources of income remain marginal.
  • With that, the advertising stop that Unilever, Coca-Cola, Starbucks and Pepsico, among others, announced against Facebook seems to have made little difference. The companies announced in June and July that they would no longer advertise through Facebook because the company would do too little to combat racism and hatred on its platforms. But then it came to a deal.
  • Operating profit increased by 12 percent to USD 8 billion. That means that the operating profit margin (operating profit on sales) comes to 37 percent, a percentage most companies can dream of.

Four challenges

Chief Financial Officer David Wehner says in a statement that he sees “ significant uncertainty ” for 2021. He points to four factors:

  • The corona pandemic has led to a sharp rise in e-commerce and an increase in online advertising. If that trend reverses, it will have an immediate impact on Facebook’s ad revenue.
  • The tightened privacy controls in the operating system for iPhones (iOS 14) may make it more difficult for Facebook to capitalize on personal data.
  • The authorities in the European Union are blocking the sending of personal data to the United States by social media companies, after the European Court of Justice has declared a treaty on the subject invalid.
  • The American company is also under attack in its own country. A committee of US Congressmen recently ruled scathingly on Facebook’s monopoly position, alluding to the forced split of the company.

Source: BusinessAM

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